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Kothari Petrochemicals Ltd.

BSE: 532096 Sector: Industrials
NSE: KOTHARIPET ISIN Code: INE720A01015
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Kothari Petrochemicals Ltd. (KOTHARIPET) - Director Report

Company director report

To the Members

The Directors have pleasure in presenting before you the 32nd Annual Reportof the Company together with the Audited Financial Statements for the year ended 31stMarch 2021.

Financial Summary of the Company

(Rs. in Lakhs)

Particulars 2020 - 2021 2019 - 2020
(i) Total Turnover 22789.16 27243.08
(ii) Profit / (Loss) before Interest and Depreciation 3787.23 3193.03
(iii) Interest 88.91 204.27
(iv) Depreciation 550.67 553.92
(v) Profit / (Loss) Before Tax 3147.65 2434.84
(vi) Tax Adjustments including Deferred Tax 893.29 601.93
(vii) Profit / (Loss) after Tax 2254.36 1832.91
(viii) Other comprehensive income 36.78 0.14
(ix) Total comprehensive income 2291.14 1833.05
(x) Profit brought forward from previous year 4102.41 2624.07

Financial Highlights

The Company's Profit before Tax for the year ended 31st March 2021 hasincreased to Rs. 3147.65 lakhs as compared to Rs. 2434.84 lakhs in the previous year.The total turnover for the year ended 31st March 2021 is Rs. 22789.16 lakhs asagainst Rs. 27243.08 lakhs in the previous year. The drop in turnover is mainly due tozero Remnant LPG sales during the year. As you are aware the Company had changed thesource of raw material since July 2019 and hence there was no Remnant LPG sales. During2019-20 before the change of raw material source the Company had to sell Remnant LPG tothe tune of Rs. 3132 lakhs. Despite the increase in Poly Iso Butylene (PIB) volume duringcurrent year as compared to previous year there is a drop in terms of value by Rs. 1263lakhs. This was mainly due to the linking off sale prices to the lower raw material baseprices and also the export prices are impacted by international demands.

Status of the plant

The plant production capacity was 2000 TPM (24000 TPA) of Poly Iso Butylene (PIB) tillFebRs. 2021 and subsequently the Company got the approval to produce 3000 TPM (36000 TPA)from MarchRs. 21. Generally the plant is in good health to produce various grades of PolyIso Butylene as per market demand.

The Company continues to enjoy the benefit from the investment made in enriching theLean PBFS (cracked LPG). The consistent supply of high-quality feed stock from the othersource from western part of country helped the Company to achieve greater operatingefficiencies and other operating improvements which has resulted in a better contributionto the bottom line.

Currently your Company is having a Captive power plant which uses Paddy husk as fueland so far the availability of fuel is ensured through proper supply agreement with 3suppliers. However in long run there will be some conditions imposed by the PollutionBoard authorities to use clean fuels like LPG or LNG to operate the Boilers. Taking thisinto consideration your Company is working on the viability of converting the existingBoiler to handle clean fuel(s).

Though the newly installed Effluent Treatment plant yields good result in terms ofquantity and quality the plant is not fully loaded as the effluent load has come downsignificantly due to improved quality of raw water.

The solar plant continues to generate power which is consumed by the main plant alongwith Captive power plant generation.

Your Company continues to get the following ISO certification - 9001:2015 for QualityManagement system 14001:2015 for Environmental Management system and efforts were takento get ISO 45001:2018 for Occupational Health and Safety Management System. We expect thiscertification in the FY 2021-22.

All statutory requirements with regard to Petroleum and Explosives Safety Organisation(PESO) and the Directorate of Industrial Safety and Health (DISH) are met on time. Allpreventive and predictive maintenance are followed systematically to keep the overallplant health to be good. performance

For the 09th consecutive year in succession your Company has achieved11312 "Accident Free" operation. The Company has been continuously impartingtraining to all its employees to ensure that all project execution apart from the plantoperation is "Accident Free" and efficient.

Your Company achieved a record production of 25001 MT (Previous Year - 23906 MT)which translates to 100% capacity utilisation in terms of licenced capacity.

Thermic fluid heaters were converted into Gas fired by replacing Furnace Oil. Most ofthe processed Off gases are now being recovered and used as fuel in the TFH units. Earlierthis was partially let out in the Flare system.

Efforts were taken and successfully started using the waste heat available in the steamcondensate in the process. A significant fuel saving has been established in the CPPboiler after we started using the waste heat energy from the steam condensate.

The efforts taken to develop new applications are showing encouraging results and ournew product has been positioned in the market to win the mindsets of the customers andfurther trials are being taking place at various new customers. As a continuity processefforts are taken to make solid Polymers (K Vis-20) which is the preferential product overthe liquid form and trials are underway with various customers.

Efforts are put forth to find value addition for the co-products of Polymer and trialsare underway with customers to get their feedback.

Plant automation

The first phase of Reactor operation in Auto mode using APC philosophy has shownencouraging results and further improvements are being taken up. Product Drum fillingactivities are also automated which has now enhanced our ability to handle more number ofdrums.

Safety

General Safety Audit has been conducted during Jan 2021. Except few actions itemswhich needs long shutdown of the plant all the other suggestions / recommendation givenby the auditing team are completed.

Process Safety Management

A Process Safety Management (PSM) is being studied to implement in your Company duringthe next financial year.

Pollution and Environment compliances

The Central Pollution Control Board (PCB) has introduced "Online" monitoringand checking for the Air and Effluent parameters. Your Company has created all necessaryfacilities as per Pollution Control Board's direction and submitted the records confirmingthe statutory requirements with respect to Pollution norms. Recently PCB has stronglyadvised all the units to retrofit the DG sets to control the PM emission by 75% from theexisting level. Your Company at a cost of Rs. 50 Lakhs is doing this retrofitting andthe work is expected to get completed by June 2021.

Research and Development

Various research activities are being continued in the R&D facility to improve theIB conversion percentage in the existing plant to improve the productivity and valueaddition for the co-products.

Conservation of energy / Technology Absorption / Foreign exchange earning and outgo:

(a) Conservation of energy

Energy Audit was completed in February 2019 and all suggestion were reviewed andimplemented during 2020-2021.

(b) Technology absorption: Nil

(c) Foreign exchange earnings and outgo:

(Rs. in Lakhs)

Particulars 2020-21 2019-20
Total Foreign Exchange earned 6983.71 4395.12
Total Foreign Exchange outflow 82.07 61.33

Dividend

The Board of Directors met on 24th May 2021 to take account of the full yearperformance various growth opportunities and the ongoing pandemic. After reviewing thisthe Board of Directors has decided not to recommend any dividend for the year 2020 - 2021given the projects that have been lined up and the forward expansion plans.

Board meetings

During the year 05 Board Meetings and 04 Audit Committee Meetings were held thedetails of which are given in the Corporate Governance Report. The intervening gap betweentwo meetings was within the period as prescribed under the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and MCA Circularsthereon.

Share Capital

The paid-up equity share capital as on March 312021 was Rs. 5884.64 Lakhs. TheCompany has not issued any shares with differential voting rights nor granted stockoptions or sweat equity.

Directors and Key managerial personnel

Mr. Pranab Kumar Rudra (DIN: 00382665) Independent Director resigned with effect from16th June 2020 and Board places on record its appreciation for his servicesduring his tenure.

Mr. Brij Mohan Bansal (DIN: 00261063) and Mr. Gautam Roy (DIN: 06659522) have beenappointed as Additional Directors in the capacity of Independent Directors of the Companyon 10th August 2020 for a period of five years subject to approval of theshareholders in this Annual General Meeting.

Mr. M. Rajavel (DIN: 08145611) was appointed as Whole Time Director on 01stAugust 2018 and the Board proposes to re-appoint him for a further period of three yearswith effect from 01st August 2021 subject to approval of shareholders in thisAnnual General Meeting of the Company.

Ms. Deepa Bansal Company Secretary of the Company resigned with effect from April 102021 and Mrs. K. Priya was appointed as the Company Secretary and Compliance Officer ofthe Company with effect from April 11 2021.

Mr. Arjun B. Kothari Managing Director Mr. M. Rajavel Whole Time Director Mr. S.Sivamahesh Chief Financial Officer and Mrs. K. Priya Company Secretary are the KeyManagerial Personnel of the Company as per section 203 of the Companies Act 2013.

Declaration from Independent Directors

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 and Regulation 16 of the SEBI(LODR) Regulations 2015 that the Independent Directors of the Company meet the criteriaof their Independence laid down in Section 149(6) including the confirmations that theirnames have been included in the Data Bank maintained by the Indian Institute of CorporateAffairs and Mr. S. Sundarraman has cleared the online proficiency self-assessment test andall other Independent Directors were exempted from undergoing this test for theIndependent Directors pursuant to Rule 6(4) of Companies (Appointment and Qualification ofDirectors) Rules 2014. During the year under review the Independent Directors met onFebruary 11 2021 without the presence of Non- Independent Directors and members of theManagement.

Composition of Audit Committee

The details of composition of Audit Committee is provided in Corporate GovernanceReport of this Annual Report. The Board has not rejected any proposal / recommendations ofAudit Committee during the year.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Key Managerial Personnel andSenior Management and their remuneration. The salient features of the Remuneration Policydetails are stated in the Corporate Governance Report. The Remuneration Policy approved bythe Board of Directors is posted on the website of the Companywww.kotharipetrochemicals.com

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism named "Whistle Blower Policy" to deal withgenuine concerns raised by the Directors / Employees if any. The details of the VigilMechanism / Whistle Blower Policy is explained in the Corporate Governance Report and alsoposted on the Company's website www.kotharipetrochemicals.com

Particulars of Loans Guarantees or Investments

The Company has not given any Loans or Guarantees covered under the provisions ofsection 186 of the Companies Act 2013. The details of investments made by the company aregiven in the notes to the financial statements. related party Transactions

All related party transactions entered into during the financial year were on an arm'slength basis and were in the ordinary course of business and there were no 'material'contracts or arrangement or transactions not at arm's length basis and thus disclosure inform AOC-2 is not required.

All Related Party Transactions are placed before the Audit Committee and the Board forapproval. Prior omnibus approval of the Audit Committee is obtained for the transactionswhich are foreseen and repetitive in nature. For all the transactions entered pursuant tothe omnibus approval so granted a statement giving details of all such transactions isplaced before the Audit Committee for their approvals on a quarterly basis.

The policy on Related Party Transactions as approved by the Board is posted on theCompany's website www. kotharipetrochemicals.com

prevention of Insider trading

The Company has adopted a Code of Prevention of Insider Trading with a view to regulatetrading in securities by the Directors and Designated Persons of the Company. The Coderequires pre-clearance for dealing in the Company's shares and prohibits the purchase orsale of Company shares by the Directors and the designated persons while in possession ofunpublished price sensitive information in relation to the Company and during the periodwhen the Trading Window is closed.

Directors' responsibility Statement

In terms of Section 134(5) of the Companies Act 2013 the Directors would like tostate that:

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Annual Return

As required under Section 92(3) copy of Annual Return is placed on the Company'swebsite.

The web link to access the annual return is https://kotharipetrochemicals.com/node/35

AUDITORS

a) Statutory Auditor

The Statutory Auditors of the Company M/s. P Chandrasekar LLP Chartered Accountants(Registration No.000580S / S200066) hold office till the conclusion of the 33rdAnnual General Meeting of the Company.

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Auditors have confirmed that they hold a valid certificate issued by the PeerReview Board of the Institute of Chartered Accountants of India. There are noqualifications or observations or any adverse remarks made by the Auditors in their Reporton the Financial Statements for the year 2020-21.

b) Cost Auditor

Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Amendment Rules 2014 the Cost Audit Records maintained by the Companyin respect of its Poly Iso Butylene (PIB) unit require to be audited. Your Directors onthe recommendation of the Audit Committee appointed M/s. P RajuIyer M. Pandurangan &Associates Cost Accountants in practice for conducting the audit of cost records of theCompany and the remuneration payable to the Cost Auditor is required to be placed beforethe Members in a general meeting for their ratification. Accordingly a Resolution seekingMember's ratification for the remuneration payable to M/s. P. RajuIyer M. Pandurangan& Associates Cost Accountant is included at Item No. 3 of the Notice convening thisAnnual General Meeting.

c) Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mrs. V. Vasumathy V. Vasumathy & Associates Company Secretary in PracticeChennai as Secretarial Auditor of the Company. The Secretarial Audit Report is formingpart of this Annual Report and does not contain any qualification or observations.

Deposits

The Company has not accepted deposits either from members or public falling within theambit of Chapter V of the Companies Act 2013 and The Companies (Acceptance of Deposits)Rules 2014 during the year. There were no outstanding deposits during and end of thefinancial year 2020 - 2021.

Significant & Material orders passed by the regulators

There are no significant material orders passed by the Regulators / Courts which wouldimpact the going concern status of the company and its future operations.

Internal Control Systems and their Adequacy

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The Internal Audit function is carried out by independentfirm of Chartered Accountants. The scope and authority of the Internal Audit is defined bythe Audit Committee. The Internal Audit Reports are placed before the Audit Committee forits review and the Internal Auditor attend the Audit Committee meetings.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internalcontrol system in the Company its compliance with operating systems accountingprocedures of the Company based on the report of internal auditor the Company undertakescorrective action in their respective areas and thereby strengthens the controls.

Risk Management

Pursuant to the requirement of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has laid down the procedures to inform Board Members aboutthe risk assessment and minimization procedures. Accordingly the Company periodicallysubmits the Risk Management Report to the Board for their review and suggestions.

Corporate Social Responsibility Policy

Pursuant to the provisions of Section 135 and schedule VII of the Companies Act 2013Corporate Social Responsibility Committee (CSR) was formed to recommend (a) the policy onCorporate Social Responsibility (CSR) and (b) implementation of the CSR Projects orPrograms to be undertaken by the Company as per CSR Policy for consideration and approvalby the Board of Directors. The policy on Corporate Social Responsibility as approved bythe Board is posted on the Company's website www.kotharipetrochemicals.com

As part of its initiatives under "Corporate Social Responsibility" (CSR) thecompany has contributed funds for the schemes of promotion of education. The contributionsin this regard have been made to the Registered Trust which is undertaking these schemes.Detailed report on CSR activities in the prescribed format is forming part of this AnnualReport.

Annual Performance Evaluation

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board has carried out the Annual

Disclosure about Cost Audit

Performance Evaluation of the Board its Committees and of the individual Directors inthe format (questionnaire) prescribed by the Nomination and Remuneration Committee of theCompany.

The structured questionnaire covers various aspects of the Board's functioning such asadequacy of the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations and governance.

The performance evaluation of the Directors (without participation of the relevantDirector) was carried out by the entire Board. The Directors expressed their satisfactionwith the evaluation process.

Separate Meeting of Independent Directors

The Independent Directors of the Company had met during the year on 11th Feb2021 to review the performance of Non Independent Directors and the Board as a wholereviewed the performance of the Chairperson of the Company and also assessed the qualityquantity and timeliness of flow of information between the company management and theBoard without the presence of the Non-Independent Directors and members of the Management.

Filing of Cost Audit report 2020 - 2021 2019 - 2020
Due Date 27.09.2021 27.09.2020
Actual Date 30.08.2021 (Tentatively) 02.09.2020
Cost Auditor Details M/s. P RajuIyer M. Pandurangan & Associates M.No.27969 Chennai. M/s. PRajuIyer M. Pandurangan & Associates M.No.27969 Chennai.
Audit Qualification in Report Nil Nil

Listing with Stock exchanges

The Company is listed in The National Stock Exchange of India Limited (NSE) and theStock Code is KOTHARIPET and ISIN: INE720A01015. The Company confirms that it has paid theAnnual Listing Fees for the year 2021 - 2022 to NSE where the Company's shares are listed.

Corporate Governance and Shareholders Information

Your Company has taken adequate steps to adhere to all the stipulations laid down inSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. A report onCorporate Governance forms part of this Annual Report. All applicable SecretarialStandards have been complied.

Certificate from the Practising Company Secretary confirming the compliance with theconditions of Corporate Governance as stipulated under SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is attached to this report. managementDiscussion and Analysis report

A detailed discussion on the industry structure as well as on the financial andoperational performance is contained in the 'Management Discussion and Analysis Report'that forms an integral part of this Report. Particulars of employees

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5 of the Company (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided elsewhere in the AnnualReport.

Particulars pursuant to Section 197(12) and the relevant Rules

a) The ratio of the remuneration of each director to the median employee's remunerationfor the financial year and such other details: Except Mr. Arjun B. Kothari ManagingDirector and Mr. M. Rajavel Whole Time Director of the Company no director was inreceipt of remuneration except sitting fees.

Sl. No. Name Designation ratio
(i) Mr. Arjun. B. Kothari Managing Director 9.50:1
(ii) Mr. M. Rajavel Whole Time Director 10.10:1

b) The percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year:

Sl. No. name Designation percentage of Increase
(i) Mr. Arjun. B. Kothari Managing Director No increase
(ii) Mr. M. Rajavel Whole Time Director 12%
(iii) Mr. S. Sivamahesh Chief Financial Officer 3%
(iv) Ms. Deepa Bansal (*) Company Secretary 8%

(*)Ms. Deepa Bansal resigned with effect from 10th April 2021 from theposition of Company secretary and Compliance Officer of the Company.

c) 1.44 % increase was reported in the median remuneration of employees in thefinancial year 2020 - 2021.

d) The number of permanent employees on the rolls of company as on 31st Mar2021: 148.

e) Average percentile increase already made in the salaries of employee's other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and any exceptionalcircumstances for increase in the managerial remuneration:

Increase of remuneration for employees and KMPs varies between 3% to 12% for the year.

f) We affirm that the remuneration paid during the period under review is as per theRemuneration Policy of the Company.

Cautionary Statement

Statements in this Report particularly those which relate to Management Discussion andAnalysis as describing the Company's objectives projections estimates and expectationsmay constitute 'forward looking statements' within the meaning of applicable laws andregulations. Actual results might differ from those either expressed or implied in thestatement depending on the circumstances.

Acknowledgement

Your Directors thank the Banks Customers Financial Institutions GovernmentAuthorities Suppliers and Shareholders for their continued support. Your Directors alsoplace on record their appreciation for the services by the employees of the Company.

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